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Reversal of Bertrand-Cournot Ranking for Optimal Privatization Level

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  • Paul, Arindam
  • De, Parikshit

Abstract

We consider a vertically related differentiated product mixed duopoly market where a public and private firm compete in the downstream market. The public firm is partially privatized and a welfare maximizing regulator chooses the privatization level. The production of the final commodity requires a key input that is supplied by a foreign monopolist who in the upstream market can practice either uniform or discriminatory pricing. We show that with uniform pricing regime the privatization is always larger under Cournot competition while in case of discriminatory pricing regime, the privatization level under Bertrand competition is always larger. We also find that under discriminatory pricing regime, the Cournot-Bertrand ranking of other relevant variables are sensitive to the degree of substitutability.

Suggested Citation

  • Paul, Arindam & De, Parikshit, 2022. "Reversal of Bertrand-Cournot Ranking for Optimal Privatization Level," MPRA Paper 116272, University Library of Munich, Germany, revised 10 Feb 2023.
    • Handle: RePEc:pra:mprapa:116272
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    References listed on IDEAS

    as
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    Keywords

    D4; D6; H4; L1; L2;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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